MANAGING SECTOR

SPECIFIC
ORGANIZATION
ASSIGNMENT ON FMCG SECTOR

Submitted by:
C. Akshay Andrews
151349

FMCG- Fast-Moving Consumer Goods

Indian consumer segment is broadly segregated into urban and rural markets, and is attracting
marketers from across the world. The sector comprises of a huge middle class, relatively large
affluent class and a small economically disadvantaged class, with spending anticipated to more
than double by 2025.
India remained the leader among all nations in the global consumer confidence index with a
score of 134 points for the quarter ending March 2016, followed by the Philippines (119) and
Indonesia (117). Consumer confidence in India has remained high for ten consecutive quarters.
Further, in the discretionary spending and savings category, nearly three out of every five
respondents from India indicated the next 12 months as being good to buy, thus ensuring once
again that India leads the global top 10 countries for this parameter during the quarter.
Global corporations view India as one of the key markets from where future growth is likely to
emerge. The growth in Indias consumer market would be primarily driven by a favourable
population composition and increasing disposable incomes. A recent study by the McKinsey
Global Institute (MGI) suggests that if India continues to grow at the current pace, average
household incomes will triple over the next two decades, making the country the worlds fifthlargest consumer economy by 2025, up from the current 12th position.
Indias robust economic growth and rising household incomes are expected to increase consumer
spending to US$ 3.6 trillion by 2020. The maximum consumer spending is likely to occur in
food, housing, consumer durables, and transport and communication sectors. The report further
stated that India's share of global consumption would expand more than twice to 5.8 per cent by
2020.
It refers to items that are purchased and consumed frequently by consumers. These are nondurable items, which have relatively low prices. The main product categories that fall under
FMCG include:
Personal and Household care: Personal care includes toiletry items of everyday use such as
toothpaste, soap, shampoo , hair oil, deodorant, perfume, talcum powder and creams and lotions
used for skin care. Household care items include items required for maintenance of household
cleanliness such as floor cleaners, dish and utensil cleaners, toilet cleaners, air fresheners, and
mosquito repellents etc. Washing related items such as detergent, washing powder are also
included in FMCG category.
Food and Beverages: Easily perishable items such as fruits and vegetables and meat as well as
items with relatively longer shelf life such as confectionery, chocolates, flour, sugar, cereals,
baked items such as biscuits, cakes and cookies , snacking items, ice creams fall under the food
category. Beverages category includes coffee, tea, fruit juices, health drinks and bottled water are
included.
From the perspective of consumers, FMCG is: frequently purchased (once or more a month),
easily purchased i.e. not much thinking/comparison between products carried out before
purchase, low investment required for purchasing these items. Typical purchase points for
FMCG include local kirana stores, grocery stores, supermarkets and hypermarkets.
From a retailers perspective, FMCG have low margins, high shelf turnover and high volume
sales items. Since levels of involvement are low for the purchase decision firms rely heavily on
advertising and promotion to increase sales.

FMCG Industry
Consumer durables revenues have been growing at a healthy pace.
The consumer durables sector revenues reached US$ 9.7 billion in FY15 and is expected to
reach US$ 12.5 billion in FY16.
Consumer durable market expected to grow at CAGR of 13 percent from FY05 to FY20.
Around two third of the total revenue is generated from urban population and rest is generated
from rural population.
Samsung has emerged as the market leader in the consumer durable segment followed by the
Indian giant Videocon.
Market Size
The growing purchasing power and rising influence of the social media have enabled Indian
consumers to splurge on good things. The Indian consumer sector has grown at an annual rate of
5.7 per cent between FY2005 to FY 2015. Annual growth in the Indian consumption market is
estimated to be 6.7 per cent during FY2015-20 and 7.1 per cent during FY2021-25.
A study by US-based networking solution giant CISCO, reveals that in India, the second-largest
smartphone market globally, the number of smartphones is expected to grow strongly to over 650
million by 2019. India continues to witness high rate of mobile phone subscriptions. Indian
smartphone shipments increased 28.8 per cent in 2015 to reach 103.6 million, thus crossing the
100 million mark, and becoming one of the fastest growing smartphone markets in Asia Pacific
region. Sales of 4G-enabled handsets increased to 15.4 million units in quarter ending March
2016. According to CISCOs Visual Networking Index (VNI) global mobile data traffic forecast
for 201419, in India, one of the world's fastest growing Internet market, the number of tablets is
estimated to reach more than 18 million by 2019.
India's e-commerce market is likely to reach US$ 38 billion (Rs 252,700 crore) in 2016*. The
online retail sector in India is expected to be a US$ 1 trillion (Rs 660,000 crore) market by 2020.
Amazon expects India to become its quickest market to reach US$ 10 billion in gross
merchandise value (GMV) and to become its largest overseas market surpassing Japan, Germany
and the UK.
SWOT of FMCG
Strengths:
Its operational cost is very low.
Its distribution network is present both in Rural as well as Urban areas.
In FMCG sector there is also a presence of well-known brands.
Favorable Government policy.
Weakness:
In FMCG industries there is very less scope of investment in technology and achieving
the condition of economies of scale mostly in small sectors.
It has very low exports.
Opportunities:
Changing lifestyle of society, unused rural market.
Increase in purchasing power of consumer by increase in their income level.

Mostly in India FMCG products are used by the consumers of 25 age group so it has
large market of domestic products for that age group.
People spend high on consumer goods.
Threats:
In case of FMCG if the product if failed in the market then it is very difficult to revive it
back in the market.
Tax and regulatory structure.
Rural demand depends upon the monsoon and its cyclical nature of demand.

Role of Government
The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online
retail of goods and services through the automatic route, thereby providing clarity on the existing
businesses of e-commerce companies operating in India.
With the demand for skilled labour growing among Indian industries, the government plans to
train 500 million people by 2022 and is also encouraging private players and entrepreneurs to
invest in the venture. Many governments, corporate and educational organisations are working
towards providing training and education to create a skilled workforce.
In the Union Budget 2016, the government has announced various tax sops and duty cuts for
intermediary products to help increase local manufacturing and reduce import dependency. The
government removed duties on various items such as components for microwaves, LCD
fabrication units, charger, battery, wired speaker, headsets, broadband modems, set-top boxes and
CCTV camera. Depending on the product category, various duties such as special additional
duty, countervailing duty and basic customs duty have been reduced in the range of four to 12.5
per cent.
Union Cabinet reforms like implementation of the Goods and Services Tax (GST) and Seventh
Pay Commission are expected to give a boost to consumer durable sector in India during 2016.
Future Prospects of FMCG Industry
The food services market in India is expected to expand at a CAGR of over 12 per cent through
2020, primarily driven by increasing disposable income, changing lifestyle, and changing tastes
and preferences of consumers. Another major factor propelling the demand for food services in
India is the growing youth population, primarily in the countrys urban regions. India has a large
base of young consumers who form the majority of the workforce and, due to time constraints,
barely get time for cooking.
India's e-commerce market is expected to reach US$ 220 billion in terms of gross merchandise
value (GMV) and 530 million shoppers by 2025, led by faster speeds on reliable telecom
networks, faster adoption of online services and better variety as well as convenience.
Further, the M2M modules market in India is expected to exceed US$ 4.4 billion by 2020, as
India has become one of the fastest growing markets for M2M modules in Asia-Pacific (APAC).
Research firm Nielsen projected that rural Indias FMCG market will surpass the US$ 100 billion
mark by 2025. Online portals are expected to play a key role for companies trying to enter the
hinterlands. The Internet has contributed in a big way, facilitating a cheaper and more convenient
means to increase a companys reach.